OVERVIEW: Industry: Hydraulics: Hydraulic gear pumps and hydraulic cylinders are considered as the backbone for various commercial and industrial applications. The major factors which will propel the demand in global hydraulic gear pumps and cylinders market include economic growth and rapid industrialization in developing countries, positive outlook for the construction sector, evolution of food processing industries, increased demand for modern agricultural equipments, need for conservation of energy, mining, aerospace & defense, upgraded automotive technology, rising demand for material handling equipments including cranes, forklifts etc. If one looks at the global demand of hydraulics market, North America, Europe and Asia-Pacific are the three major markets. In Latin America, Brazil is expected to display significant demand. Emerging and developing countries like India, China, Brazil and Russia where the rate of investments are ever increasing is expected to grow at a CAGR of 6% over the period of 2016 to 2025 (as per the report by Global Market Insights). In India, some of the most essential and basic triggers for the growth of hydraulics-related equipments & services include the shift in gears for construction activities, increasing application in the mining industry and increasing sales of automobiles. Many factories and industries have started laying more stress on automation of processes in order to enhance productivity, reduce downtime and at the same time conserve energy. This has boosted the demand for industrial hydraulic equipments.

On the basis of the type of product, the global market for hydraulic pumps can be divided into (a) Piston Pumps (b) Gear Pumps and (c) Vane Pumps. Piston and gear pumps are generally used in equipments which involve high-pressure applications, while vane pumps are used in low-pressure applications. In terms of value; piston pumps dominate the market while in terms of volumes, gear pumps dominate the market. The market for piston pumps is expected to grow at a CAGR of 3.0% i.e. from USD5.8bn in 2016 to USD6.7bn by 2021; while the gear market is expected to grow at a CAGR of 3.1% i.e. from USD2bn in 2016 to USD2.3bn from 2016 through 2021 (as per research by PRNewswire). Now, if one looks at the segment of hydraulic parts, (which are the most critical components to modern equipment manufacturing) the same is estimated to grow and fetch USD46.6bn by 2021 (as per Research and Market). Hydraulics in agricultural equipment: The population of India is ever increasing. To cater to the demand of the massive population, there is a gradual shift from the traditional farming practices to mechanized agricultural practices. When one speaks about mechanized agricultural practices, the need for hydraulics arises as equipments and services related to hydraulics have the capabilities of replacing man as well animal power. Hydraulics can have a wide range of applications in agricultural equipments like tractors, poultry house machinery, specialized harvesting machinery etc. Needless to say, this segment of agricultural machinery has been attracting FDI over the last few years.

CMP: Rs. 2160 TARGET PRICE: Rs. 3000 TIME : 12 months

SNAPSHOT

52 week H / L Mcap (INR mn)

3443 / 2051 13,697.5

Face value: 10

BSE Code NSE CODE

505242 DYNAMATECH

Annual Performance

(Rs mn) FY15 FY16 FY17 FY18E

Sales (Net) 16,288 14,938 15,078 15,383

EBITDA 1,511 1,411 1,653 1,654

EBITDA (%) 9 9 11 11

Other Income 106 50 59 61

Interest 800 728 741 841

Depreciation 509 524 544 553

PBT 308 209 428 321

PAT 286 123 146 193

Equity 63 63 63 63

EPS (INR) 45 19 23 30

Ratio Analysis

Parameters (Rs mn) FY15 FY16 FY17 FY18E

EV/EBITDA (x) 92.9 100.1 86.1 86.1

EV/Net Sales (x) 8.6 9.5 9.4 9.3

M Cap/Sales (x) 8.4 9.2 9.1 8.9

M Cap/EBITDA (x) 90.7 97.1 82.8 82.8

Debt/Equity (x) 1.7 2.0 2.6 2.3

ROCE (%) 19.7 15.0 16.2 15.2

Price/Book Value (x) 5.4 5.3 5.6 4.9

P/E (x) 143.3 111.5 55.4 71.1

Share Holding Pattern as on 30th September 2017

Parameters No of Shares %

Promoters 31,83,245 50.20

Institutions 17,24,619 27.20

Public 14,33,579 22.61

TOTAL 63,41,443 100

Quarterly Performance

Parameters (Rs mn) Sept-16 Dec-16 Mar-17 Jun-17

Sales (Net) 3,819 3,496 3,783 3,148

EBITDA 441 312 388 217

EBITDA ( %) 12 9 10 7

Other Income 20 35 11 23

Interest 188 177 195 182

Depreciation 131 133 151 137

PAT 80 12 -75 -95

Equity ( Rs mn) 63 63 63 63

TM

Note: All the data is calculated as per Market Price on 27th Oct 2017. Please Turn Over

October 30, 2017 PICK OF THE MONTH VOL-3, NO-19

Dynamatic Technologies Limited BUY

Source: www.parkerhydraulics.co.uk

Source: Annual Report

OVERVIEW: Industry (contd.) Hydraulics in construction industry: In the construction activities like construction of roads, railways, housing, infrastructure, airports etc, one should easily foresee the demand for excavators, loaders, bulldozers, cranes etc. All these equipments essentially make use of hydraulic systems. Many emerging markets like India, China, Brazil and the Middle East are bound to show growth in infrastructural and commercial projects and create a healthy demand for hydraulic equipments. In 2016, the Government of India had announced an investment of over USD325mn in the infrastructure sector by 2020.

Hydraulics in automotive industry: Hydraulic pumps have applications in engines of trucks and cars. These are basically used to generate energy to run the vehicles. The entire automotive industry is gradually moving towards automation. Moreover, if one notices carefully, the changes in customer preferences & lifestyle, reducing or low auto loan rates in many developed and developing countries coupled with improving economic situation for many developing nations will directly or indirectly influence the increase in sales of new fuel-efficient and technologically advanced vehicles. In order to capture the benefits which many MNC giants (like BMW, Toyota Motors, Honda Motors, Ford, Volkswagen, Daimler, etc) are anticipating, they have already made substantial investments in developing countries. All the triggers mentioned above are aiming at the growth story in the market for hydraulics which is about to unfold going forward. Turbochargers: The global market for turbochargers (on the basis of vehicles) can be segmented into those required for LCV, HCV and PV; where PV segment is the largest contributor and is projected to remain the largest going forward as well. In the off-highway turbochargers, agricultural tractors are expected to have the largest applications. Turbochargers are a very popular product in European, LATAM and BRICS nations. The global turbocharger market is anticipating a two-fold growth in the sales from the current USD8.5bn (in 2015) to nearly USD20bn by 2024 to grow at a CAGR of 10-11%. Some of the key factors for further growth in this segment include cost effectiveness, strict government regulations related to emission and fuel efficiency, increased popularity among prominent automakers, significant economic growth in emerging economies, increasing purchasing power of consumers, intense demand for lighter vehicles etc. These are some of the reasons for turbochargers to swiftly gain popularity in applications for light commercial vehicles, heavy commercial vehicles, ships & aircraft, heavy duty vehicles, locomotives etc. Turbochargers help improve fuel efficiency and speed. The segment of ships and aircrafts which also have turbocharger applications is anticipated to grow at a faster rate due to high government investments. On the other hand, some of the factors which can hamper the sales of turbocharger include escalation in demand for Electric Vehicles (EVs), strict environmental norms of emission and increasing cost of non-renewable fuel. Aerospace & Defence: An uptick in the demand for aircrafts can be perceived due to simple reasons like increase in passenger traffic and increased military & defence expenditures across the globe. As per Boeing, nearly 39,600 commercial aircrafts will be added in the period from 2016-2035 which is expected to show a CAGR of 4%. Boeing also perceives Asia as a major hub where deliveries to the tune of 38-40% will be witnessed. In addition to the new fleets that will be added, replacement of existing aircrafts will also add fuel to the fire where a growth of 58-60% is projected. Needless to say, many of the Tier-I OEM manufacturers have their eyes glued to APAC as a symbiotic opportunity for growth. Some of the opportunistic leaders could be Airbus, Boeing, UTC, Lockheed Martin and Rolls Royce. The Indian Air-Force is expected to spend about USD150bn on aircrafts and aero engines over the next 15-18 years. This will also open avenues for Indian component supplier and system integrators. Recent changes in defence procurement programme (DPP2016) and relaxation in FDI restrictions will invite many more strategic tie-ups on Indian soil. India is one of the cheapest manufacturing hubs, where the customer base is expanding, liberal civil aviation policies coupled with special economic zones and cost benefits. Though one cannot avoid the greater challenges faced in the Indian scenario like cost fluctuation of raw materials, requirement of technology and availability of funds; a number of technological tie-ups and joint ventures can solve the purpose for some. In this scenario, companies which are compliant to the necessary approvals and certification will reap the benefits. This is also a major entry barrier in this industry. Inorder to favour the industry and propel growth, the National Civil Aviation Policy (2016) aims at making flying affordable to the masses.

TM

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CMP: Rs. 2160 TARGET PRICE: Rs. 3000 TIME : 12 months

October 30, 2017 PICK OF THE MONTH VOL-3, NO-19

Dynamatic Technologies Limited BUY

Source: www.dieselnet.com

About the Company: Dynamatic Technologies Limited (DTL) is reputed as one of world’s largest manufacturers and suppliers of hydraulic gear pumps and automotive turbo chargers. The company has managed to maintain its leadership position in the segment of hydraulic gear pumps for more than three and half decades. DTL also builds high-precision systems & sub-systems for aerospace, automotive, homeland security and other defence related products. The company is also involved in manufacturing complex assemblies and supplying parts for aviation majors like HAL, Airbus, Boeing and Bell helicopters. The company has its wings spread across three major stable and high growth business segments of Automotive, Hydraulics, Aerospace & Defence (A&D). The company has a strong R&D team that keeps abreast with the recent changes in technology, keeps enhancing their manufacturing capabilities and grows through selective acquisitions. The company has 8 industrial complexes and 2 engineering centers in India and 3 industrial complexes and 1 engineering center in Europe. DTL has its facilities located in India (Bangalore, Chennai, Coimbatore, Nasik); United Kingdom (Swindon, Bristol); and Germany (Schwarzenberg). While having its own captive green energy a source, the company is vertically integrated with its own alloy making and casting capabilities as well. The company has 21 patents registered and is awaiting 3 more patents; in addition to this DTL has registered 8 trademarks as well. The company caters to some of the blue chip companies across the globe. Some of the esteemed customers include: (a) Automotive- Audi, BMW, Daimler, Ford, Hyundai, Nissan, Tata Motors, Volkswagen (b) Hydraulics- Caterpillar, Cummins, Eicher, Escorts, John Deere, Mahindra & Mahindra (c) Aerospace & Defence- Airbus, Bell Helicopter, Boeing, GKN Aerospace, Spirit Aero systems On the revenue front, the contribution of the different segments is: (a) Automotives account for 59% of the revenue. (b) Hydraulics account for 18% of the revenue. (c) Aerospace and Defence account for nearly 23% of the revenue. For a company which manufactures high-end and high quality products, improving the operational efficiencies has always been an important factor. Under such circumstances, R&D plays a vital role in developing, upgrading, adopting and adapting to new technologies to adhere to the growth strategy, maintain and increase the business profitability & sustainability. To favour the same, the company has one of the world’s best hydraulic technologies i.e. Dowty Technologies (technology acquired in 1973) and Plessey (technology acquired in 2007) which have British origin. The company has a research committee which regularly reviews and updates the skills and competencies required for sustainable long term growth of the company. Some of the quality accreditations earned by the company: AS9100,DGAQA and NADCAP approved Only company in the Private Sector to be certified by both Airbus & Boeing DGAQA approval for In-house Processes ISO9001:2000certified by UL AS9100 RevC certified by UL Entire Campus ISO14001 approved by Lloyds NADCAP approval for NDT, Heat Treatment and Welding Facilities

TM

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CMP: Rs. 2160 TARGET PRICE: Rs. 3000 TIME : 12 months

October 30, 2017 PICK OF THE MONTH VOL-3, NO-19

Dynamatic Technologies Limited BUY

Source: Annual Report

Source: Annual Report

INVESTMENT RATIONALE

(A) Market Leader: (i) Hydraulic: DTL is one of the world’s largest hydraulic gear pumps manufacturers. The company has technology leadership in this space of hydraulics along with finest in-house engineering laboratories. The company has been retaining its leadership position in the market of hydraulic gear pumps with its focus on agriculture, infrastructure and the energy sector. For the hydraulic division, DTL has two state-of-the art manufacturing facilities, one located in Bangalore (India) and the other in Swindon (UK).

If one looks at the operations in India, the production facility in Bangalore manufactures a wide range of sophisticated hydraulic valves and custom tailored hydraulic solutions via which the company has the capability of providing solutions like simple hydraulic pumping unit, complex marine power packs, aircraft ground support systems as well as turnkey industrial installations. The company manufactures a range of hydraulic gear pumps in cast iron and aluminium, which find applications in agricultural equipment, construction equipment, material handling equipment, mining & drilling equipment and marine equipment. DTL supplies to almost all the top OEM’s in India and enjoys nearly 60% share of the Indian organized tractors market. The company owns design IP of all products in this category. The product portfolio includes aluminium body pumps for agricultural equipment & industrial applications, cast iron gear pumps for construction equipment & earth moving equipment, lube oil pump, quadruple pump, hitch control valves, rockshaft assembly and control valves for tractors. Some of the esteemed customers in this segment include Mahindra & Mahindra, Case, Cummins, Agco, Caterpillar, Eicher, Escorts, John Deere, New Holland, Same Deutz-Fahr, Tafe, Alexander Dennis, CNH, Munice Power Products, Termhope, White House Products etc.

With regards to the operations in UK, with an experience of more than six decades in the domain of designing and manufacturing gear pumps; Dynamatic Hydraulics facility in Swindon (UK), supplies products to agricultural, construction and on-highway vehicle manufacturers. This facility has advanced design knowledge as well as comprehensive product testing and validation capabilities. Product portfolio is more or less same to that of India operations. (ii) Automotive & Metallurgy: DTL produces high quality ferrous and non-ferrous automotive components for some of the leading global automotive OEMs. The company is powered by state-of-the-art automotive component manufacturing facilities along with modern ferrous and non-ferrous foundries. Each and every subsidiary in this segment specialises in some or the other product manufacturing techniques. The R&D team works in close association with the OEMs to understand their requirements for the future product requirements. The company has a head count of nearly 60 scientists and over 600 engineers with expertise in Mechanical Engineering, Advanced Computer Aided Engineering, Materials & Metallurgical Engineering, Fluid Dynamics and Defence & Aerospace Research. (i) JKM Automotive produces high quality ferrous and non-ferrous critical engine and transmission components for leading global automotive OEMs. It caters to the needs of the Indian passenger car market. It is also eyeing some collaboration with international automotive OEMs. The product profile includes components for engine, transmission, turbocharger and chassis such as exhaust manifold, flywheel, brake caliper, lanchester housing, bracket, brake mounting plate, end yoke, compressor housing, compressor mounting bracket and fork shift. (ii) The JKM Ferrotech (facility in Chennai, India) has expertise in producing High Si-Mo automotive components with high quality standards as per industry norms. (iii) EisenwerkErla GmbH, one of the finest ferrous foundries in Europe, supplies high precision, complex metallurgical products for automotive engines and turbochargers to leading global automotive OEMs. It has patented technologies specific to the automotive industry such as Si-Mo, Ni-Resist, heat resistant steel and core making technology for turbocharger castings. (iv) Dynametal in involved in manufacturing high quality non-ferrous alloy and castings which have industrial, automotive and aerospace applications. Dynametal makes use of latest metallurgical processes and so the foundry is also different from the conventional foundries capable of manufacturing alloying metals and complex castings. Some of the esteemed customers in this domain include BMW, Daimler, Ford, Hyundai, Man, Mando, Renault Nissan, Tata Motors, Volkswagen, Audi, Borg warner, Bosch MahleTurbosystems, IHI charging systems, Vogele, Voithetc (B) Aero Special: DTL is also involved in manufacturing of high precision air frame structures and aerospace equipments. DTL is the only Indian company to be a Tier I supplier to Airbus, Boeing, Bell Helicopters and HAL. This clearly certifies the quality of products delivered by the company. The company has modern and state-of-the-art Aerospace manufacturing facilities in India and UK; so the company is effectively making use of the technical competence of UK facility aided with the cost and manufacturing benefits offered by Indian operations. Accompanied with good infrastructure (another entry barrier) which supports growth in sales for the business is, the stringent regulatory approvals and quality certifications, which DTL complies with. Some of the esteemed customers in this domain include Airbus, Agusta Westland, Bell Helicopter, Boeing, GE Aviation Systems, GKN Aerospace, HAL, Lockheed Martin, Magellan Aerospace and Spirit Aerosystems. Seeing, large opportunities in Aerospace sector, the company has acquired 27 acres of land adjacent to Bangalore International Airport to Build Dynamatic Aerotropolis-which will be involved in major sub-assemblies for the Bell 407. One can easily say there is a little bit of India in every Airbus Aircraft. The general stages of manufacturing (Airbus- Aerostructures) followed by Dynamatic include: Stage I machining - manufacturing complex parts at its factories in Bristol & Swindon, UK Stage II -manufacturing with artisanal craftsmanship Final assembly- at its facilities in Bangalore, India.

TM

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CMP: Rs. 2160 TARGET PRICE: Rs. 3000 TIME : 12 months

October 30, 2017 PICK OF THE MONTH VOL-3, NO-19

Dynamatic Technologies Limited BUY

INVESTMENT RATIONALE (contd.) (B) Aero Special (contd.) Considering the operations in India, i.e. via Dynamatic-Oldland Aerospace, the company has a partnership with some of the critical clients like MoD, HAL and other international aerospace OEMs. If one looks at the Aerospace operations in UK, in 2008 Dynamatic had acquired Oldland CNC which is a high end precision engineering company in Bristol. Oldland has a unique state-of-the-art aeronautical manufacturing facility possessing complex 5 axis machining capabilities for the manufacture of Aerospace components and tooling. By this acquisition, DTL became the first Indian company to establish a global manufacturing supply chain for some of the leading international companies in the aerospace domain. Some of the key offerings from the UK include, Dynamatic Homeland Security provides security solutions to counter modern day security threats. The R&D department

has teamed up with leading global security technology companies like India’s National Defence Forces, Homeland Security Forces, police and civilian agencies etc.

Dynamatics Patang (Quadcoptor) is a light-weight UAV which is an ideal product for the para-military for ISR activities.

The company is also involved in the segment of Micro Tactical Ground Robot platform. These are essentially tactical vehicles which are robust light weight and can be used in all terrains regions. This product was designed to help para-military units in various tactical and ISR missions.

TM

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CMP: Rs. 2160 TARGET PRICE: Rs. 3000 TIME : 12 months

October 30, 2017 PICK OF THE MONTH VOL-3, NO-19

Dynamatic Technologies Limited BUY

Source: unmannedsystemstechnology.com

Source: theflyingengineer.files.wordpress.com Source: aviation.stackexchange.com

INVESTMENT RATIONALE (contd.) (C) Make in India- Synergy

The sole aim of the Make in India initiative (which was launched in 2014 by GOI) was to encourage national and multinational companies to manufacture their products in India. IAI has been working with the Indian government for more than 25 years now. IAI is Israel's largest aerospace & defence company which primarily manufactures missiles, drones, satellites, weapon systems & munitions, unmanned and robotic systems & radars etc. India has been one of main strategic customer of IAI, hence the relationship with Indian users, customers and companies is very critical for them. With the co-operation of other high end Indian companies, IAI has been supplying state-of-the-art UAV systems and other technologies including systems for air, space, sea, land, cyber and homeland security to GOI. Thus, IAI has been able to build a robust customer-support infrastructure in India. With its intentions to tap the Indian UAV market; IAI has roped-in DTL. The companies have signed an agreement for the production, assembly and support of mini UAVs in India. As per the agreement, IAI will transfer technology and production capabilities for mini UAV systems and help develop indigenous products via Make in India project. This affiliation with IAI has some of the ideal elements essential to build a UAV enterprise in India. DTL has design and manufacturing facilities in India, Europe and US. While building a robust supply-chain ecosystem in India, the company has been involved in designing and building complex and high-precision systems & subsystems for aerospace, automotive, hydraulics, homeland security and defence equipments for global OEMs. DTL has superior aerospace production technologies due to their experience with mini UAVs in India coupled with IAI’s leading technology and experience, the combination appears a perfect blend to produce products with superior quality for their customers. So, with the concept of complementary best-value advantages, DTL is a blend of advanced robotic 5-Axis machining, qualified raw material suppliers and low cost of capital for UK and advanced 3D engineering skills, artisanal craftsmanship and low cost of manpower from India. Magal S3: DTL has signed a cooperation agreement with Magal Security Systems Ltd. (Magal-S3) to pursue Integrated Security Project(s) in India. There is an increasing demand for high-end security products and solutions for critical infrastructure in India. So the need for Combined Integrated Border Management Solutions (CIBMS) arises which aims to address the challenges in securing international borders. Magal S3 is one of the leading international providers of solutions & products for physical and video security. It has an experience of more than 45 years in delivering solutions for perimeter security technologies and complex technological security projects. Magal has served its products (tailor made security solutions) and turnkey projects to more than 80 countries. MagalS3 has a vast experience of defending Israel’s borders. Moreover, Dynamatic has good relations with Indian Defence and Security for more than 3 decades. Thus, the synergy between the two can be applicable for bringing in smart perimeter and security management technologies which will help detection and prevention of intrusion on the Indian borders. These technologies will be offered to military establishments to prevent infiltration by terrorists. These systems can also be used to secure ports, airfields, industrial buildings, commercial establishments and other critical assets across the country. The combination of Dynamatic and Magal S3 is a perfect blend of proven technological capabilities of Magal along with experience and knowledge of the Indian market via Dynamatic to benefit both the participants. Thus, the synergy is a classic example of Make in India to produce indigenous products. Carmor: DTL has partnered with Carmor (formerly known as Hatecof) to manufacture armoured vehicles and other military vehicles. This essentially falls under the Make in India initiative. Carmor is an international market leader in designated vehicles for military and civilian applications. Carmor manufactures vehicles for NATO and UN forces, military forces in America, Africa, Middle and Far East. Carmor specialises in design as well as production of armoured 4x4 all terrain military vehicles.

TM

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CMP: Rs. 2160 TARGET PRICE: Rs. 3000 TIME : 12 months

October 30, 2017 PICK OF THE MONTH VOL-3, NO-19

Dynamatic Technologies Limited BUY

Source: defenceaviationpost.com

INVESTMENT RATIONALE (contd.) 5. Subsidiaries- the core strength

The company has been built through a mixture of organic and inorganic growth, where the subsidiaries play a critical role in their own domain/s. Indian, wholly owned subsidiaries:

JKM Research Farm Limited, India, (JKMRF) is a wholly owned subsidiary which is the R&D facilitator to the company. JKM Erla Automotive Limited, India (JKM Erla) is a wholly owned subsidiary which is a non-operational investment company. JKM Ferrotech Limited, India (JFTL) is a wholly owned subsidiary where direct holding is 33.03% and remaining holding is through subsidiaries. JFTL is involved in manufacturing ferrous alloy and castings, produces High Si-Mo and Ni-Resis automotive components. Overseas, wholly owned subsidiaries

JKM Global Pte. Limited, Singapore, is a wholly owned subsidiary which is as an investment hub for overseas businesses. Dynamatic Limited, Swindon, UK, (DLUK) is a wholly owned subsidiary which is held through JKM Global Pte Limited, Singapore. Yew Tree Investments Limited is the subsidiary of JKM Global Pte Limited. DLUK has its Hydraulics unit in Swindon and its Aerospace unit (Dynamatic-Oldland Aerospace- leader in Aeronautical Precision Engineering) in Bristol. The Hydraulics unit is involved in production of high performance engineered hydraulic products, gear pump design and its manufacturing, combined variable and fixed displacement pump packages, temperature controlled fan drive systems and fixed displacement pumps in Aluminium and Cast iron with a range of additional integrated valve options. JKM Erla Holdings GmbH, Germany (JKM Erla GmbH) is involved in the business of setting up automotive components processing or manufacturing units. Eisenwerk Erla GmbH, Germany (Eisenwerk) became a subsidiary when the subsequent holding company, JKM Erla GmbH, become a subsidiary of the DTL. Eisenwerk has been in the industry for more than 630 years. It is a preferred supplier to OEMs like Audi, BMW, Volkswagen etc.

Financials: One may not feel comfortable looking at the debt and debt-equity ratios of the company; however, the company will take steps in near future to rectify the same and one should not be surprised if it monetizes the land bank which it has. The company is under continuous capex and the process will continue with time as the aerospace demands increase. Boeing seeks and looks at advantages like capability, quality and cost where India is an obvious partner and so will DTL fit into this frame. There are many segments in the company, the value of which will be unlocked with times to come ( very long run), for e.g. the potential to unlock value in the Auto segment (which is also evident from the holdings in JKM Erla 42.35% + Eisenwerk Erla GmbH 24.62% + JKM Ferrotech 33.03% = 100%).

Risks and concerns: Since the company has a vast global exposure with its subsidiaries spread in India and Europe, the company is constantly under the risk of global macroeconomics. The global auto industry in the current scenario is uneven and uncertain with growth. The operation for tractors is constantly hit by the erratic nature of rainfall. Moreover, due to global exposure, the company is also under constant threat of forex fluctuations.

Outlook and valuations: DTL is a single source supplier & manufacturer of Flap-Track-Beam assemblies for Airbus. The current scenario with focus on Make in India, providing impetus to exports from India, initial steps towards mechanized farming, medium to moderate growth expected in the automotives segment, GOI focus on aerospace and allied activities and diverse product profile of DTL which helps mitigate the risk of dependency on any single segment for growth of the company and will be a gradual booster for DTL. This stock is a pure long term futuristic pick and will not please short term traders. Looking at the futuristic demand accompanied with unmatched high precision quality of products offered by the company, we initiate a buy on the stock with a target price of Rs3000 for a horizon of 12 months.

TM

CMP: Rs. 2160 TARGET PRICE: Rs. 3000 TIME : 12 months

October 30, 2017 PICK OF THE MONTH VOL-3, NO-19

Dynamatic Technologies Limited BUY

Source: Annual Report

Source: Annual Report Source: Annual Report Source: Annual Report

TM

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Registered Office Address: Progressive Share Brokers Pvt. Ltd, 122-124, Laxmi Plaza, Laxmi Indl Estate, New Link Rd, Andheri West, Mumbai-400053; Tel No.: 022-40777200; www.progressiveshares.com Contact No.:022-40777500.